Banking/Financial Institutions

The Justice Department will probe the foreclosure practices of financial institutions for possible violations.  

Mortgage applications decreased for the fifth straight week behind a drop in refinancing despite continued record-low loan rates, while purchases increased by the most since April.

The purchase index rose 9.3 percent, the second-straight weekly increase and the biggest increase since a homebuyers tax credit expired April 30. The boost was led by a 17.2 percent increase in FHA and conventional purchase applications, the Mortgage Bankers Association said Wednesday.

The seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, dropped 0.2 percent for the week ended Oct. 1.

FHA applications are likely up ahead of new requirements — slightly higher credit scores and down payments, which went into effect Oct. 4. 

House Speaker Nancy Pelosi (D-Calif.) and 30 California House Democrats urged the federal government to investigate financial firms for "possible violations of the law" in their foreclosure practices.

The letter is the latest effort by members of Congress to pressure banks and other lenders to adjust loan terms and avoid foreclosures that continue to mount across the country.

"It appears that banks have repeatedly misled and obstructed homeowners from receiving the help Congress and the administration have sought to provide," the lawmakers wrote in a letter to the Justice Department, Federal Reserve and Office of the Comptroller of the Currency. The Obama administration put $50 billion from the financial bailout toward helping the housing market and reducing foreclosures.

"We have heard numerous stories of financial institutions being uncooperative at best or misleading and acting in bad faith at worst," the members wrote. "It is time that banks are held accountable for their practices that have left too many homeowners without real help."

The letter was signed by: Pelosi, Zoe Lofgren, Joe Baca, Xavier Becerra, Howard Berman, Lois Capps, Judy Chu, Jim Costa, Anna Eshoo, Sam Farr, Bob Filner, John Garamendi, Jane Harman, Mike Honda, Barbara Lee, Doris Matsui, Jerry McNerney, George Miller, Grace Napolitano, Laura Richardson, Lucille Roybal-Allard, Linda Sanchez, Loretta Sanchez, Adam Schiff, Jackie Speier, Pete Stark, Maxine Waters, Diane Watson, Henry Waxman, Lynn Woolsey and Mike Thompson.

The Justice Department reached a settlement Monday with Visa and Mastercard in an investigation into card companies and their restrictions on merchants and retailers.

The settlement must still be approved, and a similar settlement was not reached with AmericanExpress, the department said.

The Justice Department probed card companies and their ability to "prevent merchants" from offering discounts or rewards for using different forms of payment.

"The companies put merchants and consumers in a no-win situation: accept our card, pay our fees, and don’t even think about trying to get a discount," the department said in a statement. The Justice Department said the practices were "anticompetitive."

Rep. Peter Welch (I-Vt.) and Sen. Pat Leahy (D-Vt.) praised the department's investigation.

"This action by the Justice Department confirms what we suspected all along: credit card companies are using their market power to force merchants to pay the highest interchange fees in the world," Welch said.

Kenneth Chenault, chairman and CEO of American Express, said the settlement with MasterCard and Visa could hurt smaller card networks.

“We have no intention of settling the case,” Chenault said in a statement. "Whatever the intent, the government’s new approach would hand an unfair advantage back to Visa and MasterCard."

Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler said Monday that federal regulators aim to require pre-trade price transparency for "a significant majority" of the multitrillion-dollar derivatives market.

Federal regulators are beginning to draft new rules to boost oversight of the $615 trillion derivatives market that many blame for exacerbating the 2008 financial crisis.

As part of that process, the financial overhaul law aims to move most of the derivatives market onto third-party clearinghouses and trading platforms.

Under the law, the CFTC is required to write rules defining how some large trades, known as "block trades," may be exempt from new real-time reporting requirements. 

Regulators are beginning to look at how broadly to define those trades and how large a trade would need to be for the exemption.

In remarks at a conference of the Wholesale Markets Brokers' Association, Americas, Gensler said the goal of the block trade rule would be, "basically to get the majority of the market and maybe even a significant majority of the market into pre-trade transparency."

Still, Gensler said block trades would be allowed "some delays" in the reporting requirements as well as "exceptions for pre-trade transparency."

An executive with Wells Fargo said he checked only the dates on up to 150 foreclosure documents he signed daily.  

The admission was made during a deposition in May when the executive said he relied on co-workers to make sure the information was correct on paperwork, according to news reports Sunday. 

The deposition of the Fort-Mill, S.C.-based Wells Fargo vice president, Herman John Kennerty, was reported over the weekend by AOL Daily Finance and obtained by The Associated Press. 

While Wells Fargo officials said they believe their records are accurate, three other lenders, Ally Financial Inc.'s GMAC Mortgage unit, Bank of America Corp. and JPMorgan Chase & Co. have halted tens of thousands of foreclosures after similar practices became public. Bank of America announced its freeze on foreclosures in 23 states on Friday. 

The problem stems from issues with "robo-signers," middle managers who sign affidavits allowing banks to repossess homes that are in default. Several have admitted in depositions that they signed off on thousands of foreclosures without fully reviewing the loan documents. 

The $700 billion financial bailout is set to end officially on Sunday, but its impact will be felt well through Election Day.

The Troubled Asset Relief Program (TARP) is coming to a close as the Obama administration and some Democrats begin to highlight its role in averting a second Great Depression.

Begun under the George W. Bush administration and continued by Obama, the bailout was originally pegged to cost $700 billion. The country's largest banks have since repaid hundreds of billions of dollars with profit. And AIG and GM, two of the bailout's largest recipients, are planning on how to repay the program.

Billions more are still supporting the struggling housing market and an effort to encourage private firms to buy toxic assets -- once the original aim of the program. The government cannot start new programs with TARP money, but many of the programs, particularly to support the housing market, are still underway.

Last week, in the lead-up to the official end, White House Press Secretary Robert Gibbs said TARP is estimated to cost taxpayers less than $50 billion.

The lowered estimate was the latest effort by some Democrats and private economists, to argue the program was a success, despite the public outcry over bailouts for Wall Street.

Treasury Secretary Timothy Geithner recently praised the program as "one of the most effective emergency programs in financial history," even as he acknowledged that it remains a "four-letter word."

On the campaign trail, the bailout remains a threat to both Democrats and Republicans.

Sen. Bob Bennett (R-Utah) lost a tough primary earlier this year, after persistent criticism over his support for TARP from opponent Mike Lee.

Missouri Secretary of State Robin Carnahan (D) used some of her first Senate campaign ads to criticize Rep. Roy Blunt's (R) support for TARP in 2008. Rep. Betsy Markey (D-Colo.), who wasn't in Congress when TARP was first passed, used one of her first ads in August to criticize Wall Street bailouts.

Rep. Spencer Bachus (R-Ala.), the ranking member on the House Financial Services Committee, on Friday said the Obama administration is continuing to rely on TARP funds to finance its agenda.

"The TARP program is alive and actively funding the Democrats’ liberal agenda," Bachus said.

Bank of America suspended foreclosure proceedings in 23 states Friday over problems with paperwork. 

The nation's largest bank joins J.P. Morgan and Ally Financial as the third major lender to put all foreclosures on hold to review whether "certain affidavits have followed the correct procedures," the company said. 

The Charlotte, N.C.-based lender was unsure how many people would be affected while they work out documentation problems, although they didn't provide any indication as to whether any errors were suspected in its records. 

The Commodity Futures Trading Commission (CFTC) on Friday is expected to propose limits on how much control banks and other large firms have over clearinghouses and exchanges at the center of the $615 trillion derivatives market.

The proposed limits would be among the first efforts by regulators to implement the financial overhaul law signed by President Obama in July.

The proposals seek to reduce conflicts of interest by limiting the voting power and ownership in exchanges, "swap execution facilities" and clearinghouses. Congressional lawmakers considered imposing limits on the ownership structure and decided to leave the specifics to the CFTC and Securities and Exchange Commission (SEC).

Sen. Ted Kaufman (D-Del.), was appointed Thursday to the Congressional Oversight Panel (COP), which oversees the Troubled Asset Relief Program (TARP). 

Kaufman, tapped by Senate Majority Leader Harry Reid (D-Nev.), fills the open position held by Elizabeth Warren, who left to become interim director of the Consumer Financial Protection Bureau. 


The panel will expire April 3, 2001, six months after the $700 billion TARP ends on Oct. 3, and is expected to produce six more reports on on the financial industry's bailout program. 

Kaufman, who is leaving Congress, will serve until his successor is sworn in Nov. 15. 

Treasury Secretary Timothy Geithner said today the final cost of TARP is expected to come in below $50 billion.